In order to plan, control, and evaluate the software development process, one needs to collect and analyze data in a meaningful way. Classical techniques for such analysis are not always well suited to software engineering data. A pattern recognition approach for analyzing software engineering data, called optimized set reduction (OSR), that addresses many of the problems associated with the usual approaches is described. Methods are discussed for using the technique for prediction, risk management, and quality evaluation. Experimental results are provided to demonstrate the effectiveness of the technique for the particular application of software cost estimation